The UK economy contracted by 0.7 per cent in the last quarter according to latest figures from the Office of National Statistics (ONS).

The contraction was far worse than consensus forecasts of around 0.2 per cent, and follows a 0.4 per cent contraction in the last quarter of 2011 and a 0.3 per cent contraction in the first quarter of the 2012 year.

Economists have blamed the extra holiday given for the Queen's Diamond Jubilee celebrations for the latest figures, which show a contraction of 0.5 per cent more than forecast.

It was also the wettest quarter since records began more than 100 years ago.

The latest ONS figures show a decline across all sectors in the second quarter, with output from the service industries - including the financial sector - down 0.1 per cent, manufacturing and other production industries down 1.3 per cent and construction down 5.2 per cent.

By contrast, the latest GDP figures for the Scottish economy revealed growth of 1.2 per cent in the production sector and 0.2 per cent in the service sector.

However, the contraction in the construction sector in Scotland was steeper than reported for the rest of the UK, down 6.9 per cent in the second quarter of the year.

In a report published last week the International Monetary Fund (IMF) warned the UK recovery had stalled as a result of austerity measures and balancing of the UK economy was likely to take much longer than originally envisaged.

Its report stated: “Looking ahead, the economy is expected to grow modestly, but with current policy setting the pace it will be insufficient to absorb significant slack in the economy, raising the risk of permanent loss of productive capacity.”

And the IMF report goes on to state “the big picture on growth is one of stagnation since 2010”.

The IMF said the UK coalition government may have to ease its budget cutting if the UK economy continues to contract, and the IMF drove this home by cutting its UK growth forecast from 0.8 per cent this year to just 0.2 per cent.

The economy is officially in recession if GDP contracts in two consecutive quarters.

With the UK economy now having recorded three consecutive quarters of economic contraction, it marks the longest double-dip recession in more than 50 years.

Scotland's economy officially followed the UK into double-dip recession with GDP contracting by 0.1 per cent in the first quarter of 2012 after contracting 0.1 per cent in the fourth quarter of 2011.

However, employment in Scotland had been on the rise this year, and last month was the fourth in a row unemployment fell north of the border.

The total number of people out of work in Scotland now stands at 215,000, including those who are unemployed and not eligible for benefits – a drop of 4,000 between March and May, though still 10,000 more than at the same point a year ago.

Scotland's employment rate now stands at 71.4 per cent compared with the UK average of 70.7 per cent.

But the unemployment rate of 16 to 24-year-olds in Scotland rose by seven per cent between March and May 2012, and now stands at 40 per cent.

The UK unemployment rate also fell by 65,000 to 2.58 million in the three months to May, ONS figures suggest, and employment rose by 181,000 to 29.35 million, though 6,100 more people are now claiming jobseeker's allowance, taking the total to 1.6 million in June.

In the past four years, the UK has barely moved out of recession, having failed to recover from the 18-month recession brought on by the banking crisis in 2008.

The UK economy showed the first signs of growth in the last quarter of 2009, at a point when the economy would have officially fallen into depression.

But since the fourth quarter of 2009, GDP has fallen in five of the last seven quarters, with the latest drop of 0.7 per cent the largest single decline during that time.

Figures also released today by the Accountant in Bankruptcy show the number of corporate insolvencies in Scotland rose by 22.4 per cent in the second quarter of 2012 compared with the same period last year and by 9.1 per cent on the last quarter of 2011.

Accountants PKF said 420 Scottish companies went bust between April and June - representing a rate of 32 a week – with second quarter corporate insolvency rates now the highest ever recorded.

And the rate of personal insolvency in Scotland rose by 36.1 per cent in the first quarter against the last quarter of 2011, with 5,601 personal insolvencies recorded in Scotland in the first quarter of 2012 – a rate of 430 a week.

Bryan Jackson, corporate recovery partner with PKF, said: “After the record number of corporate failures in the first quarter I seriously doubted that the figures could get any higher and yet here we are facing corporate meltdown.

“The numbers are rocketing up and there is little hope of things improving.

“We have seen long established, well known, businesses collapse in the last year and yet there appears to be no end in sight for the misery facing Scotland’s business community.”

He added: “The concern is that when the recession does end - and there is little sign at the moment - will we have the infrastructure to grow Scotland’s economy?

“With such a depletion of the business stockpile it is entirely predictable that growth will be slow because there will be fewer companies to grow the economy.

“Although I would like to think that the situation could not deteriorate any further the reality is that it is difficult to see anything other than more economic hardship in the months to come.”